Prime Minister Datuk Seri Najib Tun Razak announced
yesterday that the Government is scrapping the New Remuneration Scheme for
civil servants (SBPA) and the existing Malaysian Remuneration System (SSM) will
be reintroduced with some enhancements. The PM added that a commission will be
set up to conduct a comprehensive study of the civil servant remuneration
system.
OUR TAKE
A more structured,
transparent approach. The previous SBPA was met with criticism from the
civil servants union which claims that the scheme awards unequitable salary increases
that favour those in the higher ranks of the civil service. We gather that the salary
adjustments announced yesterday, as shown in Figure 1, will be backdated from 1
Jan this year and will be paid from this month (or the next) onwards. The PM
also announced that the Cost of Living Allowance (Cola) had been increased from
RM200 to RM250 for those in the B category while those in the C category will
receive RM150 compared with RM100 before. Given that the election is just
around the corner, the move appears to be an attempt to appease the
lower-ranked government servants who make up the majority of the 1.4m civil
service force.
Already factored into
MBSB’s earnings. We believe the overall effect from the pay hike showed in
Figure 1 is equivalent to the upward salary adjustments under the SBPA, which
we have incorporated into our forecasts. As depicted in Figure 2, assuming a conservative
5% growth (average historical growth: ~8%) in Federal Government emoluments
for 2012, the potential size of the
civil servant personal financing market will theoretically expand by
RM4.6bn. This means that MBSB can easily expand its civil servants personal
loan base by another RM204.8m, assuming that the company maintains its current
market share at 4.5%. However, we believe that the positive effects could only
be measured from 2Q12 onwards as the adjusted salaries would only be paid out
this month or the next.
Maintain BUY. Apart from the benefits arising from the
civil servant salary hike, we remain positive on MBSB’s prospects as we
continue to like the company’s diversification strategy and innovativeness in
expanding its business. Thereby, we are retaining our BUY recommendation on the
counter, as well as its fair value of RM2.70, premised on 2.6x FY12 P/BV.
Source: OSK188
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